Boston Beer cuts annual guidance on lower volumes

MariaArmental

Boston Beer Co., the maker of Samuel Adams Boston Lager, warned it would cut costs to adjust to lower volumes, and it further reduced its projections for the year, citing continued weakness of its brand.

The company, which has now reported three consecutive quarters of sales and profit declines, now projects shipments and depletions, or sales by distributors to retailers, to remain flat from the year earlier or fall as much as 4%, compared with its earlier view of a 4% decline to a 2% increase.

Meanwhile, the company now expects to earn $6.40 to $7 a share, down from its earlier view of $6.50 to $7.30 for the year.

Still, shares -- which are down 18% this year -- rose 2.6% to $169 in after-hours trading Thursday as the company's financial results were better than expected.

Without giving specifics, Chief Executive Martin Roper referred in a news release to an increased "focus and urgency on cost savings" given the lower volume projections and said company officials are "evaluating all our opportunities to better fit the current volume environment."

For the latest quarter, Boston Beer's core shipment volume fell 4% to 1.1 million barrels, driven by declines in Samuel Adams, Angry Orchard and Traveler brands. The company reported a profit of $26.6 million, or $2.06 a share, compared with $29.9 million, or $2.18 a share, a year earlier.

Net revenue, which excludes excise taxes, rose 3% to $244.8 million.

Analysts surveyed by Thomson Reuters had projected profit of $1.94 a share on $238.9 million in revenue.

Gross margin narrowed to 51.8% from 54% a year earlier.

Founded in 1984 by C. James Koch, the company revolutionized the beer industry in the U.S. when it started selling a "craft" beer from the Koch family recipe book. It was a beer that Mr. Koch's great-grandfather had made at his brewery in St. Louis in the 1870s.

Mr. Koch, the company's chairman and former chief executive, went bar to bar selling the concoction, named after Samuel Adams, the Revolutionary War leader and onetime brewer. The first cases of Samuel Adams Boston Lager were sold on Patriots' Day in Boston in 1985. Last year, the company sold about 4.3 million barrels, up nearly 4% from the year earlier.

The Brewers Association, which represents small brewers, defines craft breweries as those who make up to 6 million barrels a year.

One of the largest brewers still based in the U.S., Boston Beer has been hard hit by shifting consumer preferences and a surge in competition as craft beers became trendy. In response, it has introduced new styles and is planning to revamp its Sam Adams brand with new packaging this year.

Jonathan N. Potter, an LVMH Moët Hennessy Louis Vuitton and Diageo PLC executive, is scheduled to join the company next month as chief marketing officer.

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